Wynn Resorts Ltd. board member Kazuo Okada scored at least an interim legal victory Thursday in his lawsuit against the casino resort company.
Siding with Okada, a state judge in Las Vegas ruled his position as a director gave him the right to inspect confidential business records so long as his requests were reasonable.
Clark County District Court Judge Elizabeth Gonzalez said some of his requests appeared to be reasonable, while some may not be.
She deferred a final ruling on his records request for two weeks.
Wynn attorney Robert Shapiro said after the hearing that Wynn would now consider the reasonableness of Okada’s requests. Gonzalez then likely will deal with any that are denied as unreasonable.
Okada, the billionaire businessman who owns Tokyo gambling equipment companies, has a nearly 20 percent stake in Wynn stock valued at about $2.74 billion. He filed suit Jan. 11 contending he had been denied access to certain books and records showing how funds he invested in Wynn had been spent. He also wants records detailing a $135 million Wynn donation pledge to the University of Macau — a gift Okada opposed when it was considered by the Wynn board.
Wynn management said the lawsuit is related to the company’s decision not to participate with Okada in a Philippines gambling resort that, in its view, will compete with Wynn. Attorneys for Okada said that theory is being promoted by the Wynn side while the Philippines hasn’t been mentioned by Okada in his lawsuit.
During oral arguments Thursday before Gonzalez, Gidon Caine, an attorney for Okada, said there was a common law right nationwide for directors like Okada to inspect confidential records.
That way, he said, company directors can accomplish their fiduciary duties to act in the best interests of stockholders without relying only on the information “spoon fed” to them by management.
“The right of inspection of records is crucial,” said Caine, a partner in Menlo Park, Calif., with the law firm Alston & Bird LLP. “It’s a way the directors can check up on management.”
He said if Wynn’s argument was that management could control the information that directors receive, the company had it backward.
“Under Nevada law, the board of directors runs Wynn Resorts — not management,” he said, adding Okada made his record request in November only to be turned down the by company.
Las Vegas attorney Kirk Lenhard, representing Wynn, agreed directors could demand to see documents but said those demands must first be made to the board of directors, not directly to the company.
“Wynn is asking you to not take the board out of the equation,” Lenhard, an attorney with the law firm Brownstein Hyatt Farber Schreck, told Gonzalez.
Otherwise, he said, chaos would result in corporate boardrooms in Nevada, with directors making records inspection requests to companies every time they are outvoted by their fellow directors on particular issues.
Gonzalez, however, said directors had reasonable rights to see confidential business records, and she made it clear that directors wouldn’t need to go through their fellow directors to make those requests.
“Each director has a clear right to inspection under the common law,” Gonzalez said, adding that in two weeks she’d again review the issue of whether the document requests were reasonable.
The development is expected to set in motion a process in which Wynn will respond to individual document requests by Okada.
Gonzalez said that during the hearing set for Feb. 23, she would order Wynn to produce any documents she finds were requested under the reasonable standard but that Wynn didn’t produce.
“Judge Gonzalez was extremely well prepared,” Shapiro, of the law firm Glaser Weil Fink Jacobs Howard Avchen & Shapiro LLP, said after the hearing. “She did not (immediately) grant the relief that Mr. Okada sought. She did, however, ask us to consider the reasonableness of their request. We are going to go back to the board of directors of Wynn, consider those requests and the reasonableness of them, and report back to Judge Gonzalez in two weeks.”
Asked by reporters what the dispute was really about — for instance, the dispute over the Philippines development — Shapiro said he had no further comment.
One of Okada’s companies, Aruze USA Inc., issued a statement praising Gonzalez’s ruling from the bench.
“We are pleased that the court has confirmed Mr. Okada’s right to inspection. Mr. Okada looks forward to working with Wynn Resorts over the next two weeks, as directed by the court, to gain access to Wynn Resorts’ books and records. We view today’s decision as validation of Mr. Okada’s role as a director,” Aruze USA said.